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Saturday

Games Builders Play

A dear friend is in process of buying an apartment. He is a typical upwardly mobile BPO executive, born and brought up in small time town in cow belt. Did his engineering and was making cars safer to travel. And then he was bitten by BPO bug and he joined our company in the quality team. He did excellent and was promoted in short span of time. Life passed by us and we moved to different companies but remained friends. A few days back he sent me a copy of a contract to see if everything is ok with the contract. This was a contract for an apartment that he is planning to book in a complex in NOIDA, near Delhi.

Now let me remind my dear readers that yours truly is no contract law expert but a hobbyist personal finance blogger who is slowly moving towards his goal of not working for money.

So here are some points from this contract that we all need to keep in mind when getting into a contract with builder:

The total value of apartment was mentioned as INR 5255000/- (some body needs to help me to download the cool Rs symbol font). It also stated that the price included apartment, common areas, parking, IFMS (Interest Free Maintence Security), 1 KW of power connection.

Now when I scrutinized it further somewhere in the middle of a gazillion clauses it was mentioned that with each apartment it is mandatory to buy one parking and it is available on a first come first served basis. My question was if the price is inclusive of parking why the builder wants us to buy a parking? That too on a first come first serve basis.

The price mentioned that it is inclusive of 1 KW of power connection but the brochure mentioned of 100% power backup. There was no mention of the power backup in the contract. With some of my friends in the past with some other builders at the time of possession the builders have suddenly asked for more than 1.5 Lakhs for power backup and there argument was that the price inclusive is of 1 KW power connection for power backup you need to pay extra. At this stage one has already paid more than 90% of the price of the apartment and most people would cough up the amount rather than haggle with the builder and further delay the possession of apartment.

A further clause mentioned that once the builder gives the possession of the apartments to the buyers and a society is formed the society and the apartment owners will have ownership of only the apartments. The common areas, the park the terrace etc. will remain the property of the builder and he is free to use, sell lease them as deemed fit. What this means is that once the builder has sold the apartments he is free to rent the terrace to mobile companies for towers, he can build more apartments for the area mentioned as park in the plans shown to early buyers. This has actually happened with us with our apartment the area that was mentioned as park in the plans shown to us now has apartments and we could do nothing about the same. This also means that the apartment society will have no means of additional income and will be dependent solely on the contributions from the members for maintenance, and the builder will continue to interfere in the affairs of the complex long after he has sold the flats.

The craziest clause was that if you delay any installment to the builder during construction phase you need to pay interest at the rate of 20% per annum. ( They could as well ask for your kidneys), and you will not be eligible for any delayed possession penalty by the builder. However if due to some reason builder has to pay a penalty it is capped at 5 Rs per square feet for delayed possessionthat too only 6 months after the promised date of hand over.

Also if due to some reason you wan to cancel your apartmentyou will loose 15% of the amount deposited and if for the remaining amount builder delays the payment to you for the refund amount he is going to pay you interest rate of only 6% per annum. Yesyou read it right if you delay you pay 20% per annum or your kidneys whichever is costing more but if the builder delays your payment he pays only 6% per annum ( which is less than the prevailing Fixed Deposit rate).

These are just some of the points that I could find in the half hour I spent on it. I am sure if one scans the contract more diligently more such loopholes will come, that the builder will use to milk you dry.

Now I don’t think you and me as consumer can do much about any of these clauses. As no builder will budge from his stand as they know you and I do not have the muscle, time or political clout to make any difference.

The funny thing in this country is that for products like insurance and mutual funds where you may invest only 500/- per month we have regulators. Not just regulators we have regulators who are trying to regulate each other (remember SEBI Vs. IRDA fight), but for housing sector where most individuals will put their life’s saving we have no regulator of standardization of contracts or transparency norms.

I don’t think anybody cares about housing sector if the Adarsh housing society scam has proven anything. The people who are supposed to safeguard yours and mine interest are too busy to fill their own homes to care about us.